““MANAGING DEMAND & CAPACITY MANAGING DEMAND & CAPACITY ANDAND

WAITING LINE STRATEGIES”WAITING LINE STRATEGIES”

Presented By:

Anubhav (07)

Vipasana(40)

CONTENTSCONTENTS

Variation In Demand Relative to Variation In Demand Relative to DemandDemand

Combinations of Demand & SupplyCombinations of Demand & Supply Capacity constraintsCapacity constraints Demand PatternsDemand Patterns Shifting Demand to Match CapacityShifting Demand to Match Capacity Adjusting Capacity to Match DemandAdjusting Capacity to Match Demand Yield ManagementYield Management Implementing Yield Management Implementing Yield Management

SystemSystem Waiting Line StrategiesWaiting Line Strategies

FACTORS LEADING TO FACTORS LEADING TO GAP3GAP3

SERVICE PROVIDER

CUSTOMER

GA

P 3

1.Organizations fail to smooth the peaks

and valleys of demand.2. Overuse of capacities3. Attract an inappropriate

customer mix in their effort to build4. Relying too much on

price on smoothing demand

VARIATION IN DEMAND VARIATION IN DEMAND RELATIVE TO DEMANDRELATIVE TO DEMAND

COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY

Excess demand:Excess demand: Supply:Supply: Greater than maximum supply. Issues:Issues: 1. Customers turned away

2. Lost business opportunities.

3. Resources under greater pressure.

4. Service Quality suffers.

5. Crowding.

6. Staff and facilities overtaxed.

7.Customers seek competitor's offerings

COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY

Demand Exceeds Optimum Demand Exceeds Optimum Capacity:Capacity: Supply:Supply: Maximum supply Issues:Issues: 1. All customers serviced.

2.Excess pressure on all resources- facilities and staff.

3. Queuing and long waits.4. Crowding.5. Service quality suffers.

COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY

Demand and Supply are Well Demand and Supply are Well Balanced:Balanced: Supply:Supply: Optimum supply. Issues:Issues: 1. Resources utilized at an

ideal rate.2. Productivity ideal3. Service quality delivered.4. No delays.5. Pleasant amount of crowding.

COMBINATIONS OF DEMAND COMBINATIONS OF DEMAND AND SUPPLYAND SUPPLY

Demand Less Than Optimum Supply:Demand Less Than Optimum Supply: Supply:Supply: Less than optimum supply. Issues:Issues: 1.Resources under-utilized.

2. Productivity decreases.3. Customers receive excellent

individual service.4. Customers have full use of

facilities.5. No waiting.6. Lack of customers could creative

negative image or atmosphere.

CAPACITY CONSTRAINTSCAPACITY CONSTRAINTS

Time Labor Equipment Facilities Optimal versus Maximum use

of capacity

CONSTRAINTS ON CAPACITYCONSTRAINTS ON CAPACITYNature of

ConstraintsType of Service

Time LegalConsultingAccounting

Medical

Labor Law firmAccounting firmConsulting firm

Health Clinic

Equipment Delivery serviceTelecommunications

Network services

Facilities HotelsHospitalsAirlinesSchools

DEMAND PATTERNSDEMAND PATTERNS

Charting of demand patterns Predictable cycles Random demand fluctuations Demand patterns by market

segment

STRATEGIES FOR MATCHING STRATEGIES FOR MATCHING CAPACITY & DEMANDCAPACITY & DEMAND

Shifting demand to match capacity

Adjusting capacity to meet demand

SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY

Demand too highDemand too high

Use signage to communicate busy days and time.

Offer incentives to customers for usage during non peak times.

Take care of loyal or “regular” customers first.

Advertise peak usage times and benefits of non peak use.

Charge full price for the service – no discounts.

Demand too lowDemand too low

Use sales and advertising to increase business from current market segment.

Modify the service offering to appeal to new market segments.

Offer discounts or price reduction.

Modify hours of operation.

Bring the service to the customer.

SHIFT DEMAND

SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY

Strategy: Strategy: Vary the service offering.

Tactics for high demand:Tactics for high demand: Modify service offering to help

facilitate extra demand. Reduce augmented service element.

Tactics for low demand:Tactics for low demand: Modify the service offering to appeal

to different market segment. Increase augmented service

elements- value add by developing complementary products.

SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY

Strategy:Strategy: Modify timing & location of service delivery.

Tactics of high demand: Tactics of high demand: Get consumers to come to

service facility. Tactics for low demand:Tactics for low demand:

Bring the service to consumer.

SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY

Strategy:Strategy: Differentiation on price.

Tactics of high demand:Tactics of high demand: Increase price to match

demand. Charge full rice.

Tactics for low demand:Tactics for low demand: Offer discount & price reduction.

SHIFTING DEMAND TO SHIFTING DEMAND TO MATCH CAPACITYMATCH CAPACITY

Strategy:Strategy: Communicate with customers.

Tactics for high demand:Tactics for high demand: Letting the customers know of peak

demand so that they can choose to use the service at alternative times and avoid crowding or delays.

Tactics for low demand:Tactics for low demand: Communicate the various promotional

schemes and emphasize on various benefits during slow periods.

ADJUSTING CAPACITY TO ADJUSTING CAPACITY TO MATCH DEMANDMATCH DEMAND

Demand too highDemand too high

Stretch time, labor, facilities & equipment.

Cross-train employees. Hire part-time

employees. Request overtime work

for employees. Rent or share facilities. Rent or share

equipment. Subcontract or

outsource activities.

Demand too Demand too lowlow

Perform maintenance, renovation.

Schedule vacations

Schedule employee training.

Lay off employees.

ADJUST CAPACITY

ADJUSTING CAPACITY TO ADJUSTING CAPACITY TO MATCH DEMANDMATCH DEMAND

Stretch Existing Capacity:Stretch Existing Capacity: in such cases no new resources are added; rather the people, facilities and equipment are asked to work harder and longer to meet demand. Stretch time. Stretch labor. Stretch facilities. Stretch equipment.

ADJUSTING CAPACITY TO ADJUSTING CAPACITY TO MATCH DEMANDMATCH DEMAND

Align Capacity with Demand Align Capacity with Demand Fluctuations:Fluctuations: by adjusting service resources creatively, organizations can in effect chase the demand curves to match capacity with customer demand patterns. Also called Chase Demand. Use Part-Time Employees. Outsourcing. Rent or Share Facilities or Equipment. Schedule Downtime during Periods of Low

Demand. Cross-Train Employees. Modify or Move Facilities and Equipment.

YIELD MANAGEMENT It is the process of allocating the

right type of capacity to the right kind of customer at the right price so as to maximize revenue or yield.

Yield=Actual revenue/Potential revenue Actual revenue=actual capacity

used*average actual price Potential revenue=total

capacity*maximum price

IMPLEMENTING YIELD MANAGEMENT SYSTEM

1. Identification of a customer base using a segmentation process

2. Develop awareness among managers of changing customer needs & expectations

3. Estimating price elasticity of demand for each market segment

4. Make managers responsive to changing market conditions – demand seasonality/variations

5. Reliable demand forecasting methods and historical demand data

CHALLENGES & RISK

Loss of competitive focus. Customer alienation. Employee morale problem. Incompatible incentive and

reward systems. Lack of employee training. Inappropriate organization of

the yield management function.

WAITING LINE STRATEGIES Employ operational logic

modify operations adjust queuing system

Establish a reservation process

Differentiate waiting customers importance of the customer urgency of the job duration of the service

transaction payment of a premium price

WAITING LINE CONFIGURATIONS

WAITING LINE STRATEGIES Make waiting fun, or at least tolerable

unoccupied time feels longer than occupied time preprocess waits feel longer than in-process

waits anxiety makes waits seem longer uncertain waits seem longer than known, finite

waits unexplained waits seem longer than explained

waits unfair waits feel longer than equitable waits the more valuable the service, the longer the

customer will wait solo waits feel longer than group waits